THE NEW YORK TIMES (1996) – AS INSURERS CUT FEES, DOCTORS SHIFT TO ELECTIVE PROCEDURES

Dr. Phillip Haeck, a Seattle plastic surgeon,
used to spend half his working hours rebuilding the breasts of cancer
patients and performing other reconstructive procedures. Then
managed-care companies started to cut his fees by 60 percent or more.

So
Dr. Haeck switched to cosmetic procedures that insurers do not cover,
like breast enlargement. No longer restricted to the $1,980 fee that
insurers allowed him for a six- to eight-hour breast restoration, he can
now earn $3,800 for inserting saline breast implants, which takes two
hours or less.

He was surprised by how many women were willing to
pay. His income has already recovered, he said, and his working day now
ends an hour earlier because he deals with far fewer insurance forms.

Just
as Dr. Haeck has done, thousands of doctors, frustrated by the price
controls, red tape and sometimes intrusive oversight of managed care,
have begun building lucrative practices in fields like cosmetic surgery,
correcting myopia with lasers, and infertility treatment, where
patients will pay even when insurers will not.

Insurance
companies refuse to pay for many of these elective procedures, arguing
that they are not medically necessary or are still experimental. But a
growing number of Americans are willing to spring for them — at
handsome prices. Indeed, while it used to be assumed that a doctor could
charge a higher fee when an insurer was helping to foot the bill, the
opposite is now true in many cases. Fees are often far higher than those
doctors can charge under managed care for work requiring comparable
skill and time.

The doctors increasing their emphasis on such
procedures include:

*Physicians doing more cosmetic surgery,
including plastic surgeons, dermatologists, ophthalmologists, ear, nose
and throat specialists, dentists, gynecologists and general
practitioners. Among the most common procedures are breast enlargement;
removal of wrinkles, furrows and bags under the eyes; face lifts; nose
jobs; hair transplants for men; vein surgery; chemical peels of
unsightly skin, and liposuction to remove fatty tissue. The fee for such
procedures can range from a few hundred dollars to more than $20,000.

*Ophthalmologists,
who typically receive less than half the $2,000 that they used to get
for each lens implant for cataract patients, shifting to a new surgery
that uses lasers to correct nearsightedness — and charging $1,500 to
$2,000 an eye.

*Some ear, nose and throat specialists — whose
fees have been cut 40 percent to 60 percent under managed care — now
capitalizing on a new technique: using lasers to eliminate snoring by
removing tissue from the uvula at the back of the tongue. A typical fee
is $2,500.

*Some obstetrician-gynecologists with special training
in infertility services now averaging $2,000 and more for in vitro
fertilizations.

*Some urologists, whose surgical fees have
dropped to $600 from $1,400 for treating enlarged prostate glands, now
making a business of penis-enlargement surgery. Those fees range from
$4,800 to $7,000.

To be sure, the overwhelming majority of the
nation’s 650,000 physicians are still deeply enmeshed in managed care
and are not reaching out for more lucrative niches like these. But there
is wide agreement in the medical community that as the number of
procedures that do not qualify for insurance coverage — and the
popularity of such procedures — grow, a rising number of doctors are
making the most of this.

One reason that these specialists can
find enough takers paying out of their own pockets is the stunning
increase in family income of the wealthiest Americans. The average
income for the top 20 percent of households grew to $105,945 in 1994
from $73,754 in 1968, a jump of 44 percent after adjusting for
inflation, according to the Census Bureau. That has occurred even as the
number of uninsured people grows and as many people see their own
medical benefits reduced.

Also, some doctors and patients have
found imaginative ways to get insurers to pay part of the bill. Nose
jobs can get some insurance coverage if the doctor indicates that the
patient has had trouble breathing. Some dermatologists who remove spider
veins can get insurers to pay by calling them artery-blocking varicose
veins.

The physicians’ rush to such procedures is not surprising.
Managed care has been cutting the flow of patients and sharply reducing
fees for many specialists, notably dermatologists, ophthalmologists,
ear, nose and throat specialists, general surgeons, cardiac and vascular
surgeons, cardiologists, anesthesiologists and gastroenterologists,
said Dr. Richard Doyle, a management consultant in St. Louis with the
Milliman & Robertson consulting firm.

No one tracks the
number of doctors performing procedures not covered by insurance or how
that number has changed, but there are many indications that it is
growing. For example, the number of board-certified plastic surgeons
rose 75 percent, to 5,200 in 1994, from 2,980 in 1980, according to the
latest available surveys by the American Medical Association. And last
year 40 percent of plastic surgeons said cosmetic work was now their
main business, up from 32 percent in 1991, according to the American
Society of Plastic and Reconstructive Surgeons.

The American
Academy of Cosmetic Surgery said the number of commonly performed
cosmetic procedures doubled, to 1.09 million, between 1990 and 1994, the
latest available year.

Dr. Randal Haworth, a
Beverly Hills, Calif., plastic surgeon, said that by concentrating on
cosmetic surgery, ”We are not held fiscal and emotional hostage by
these people in managed care; secondly, by refusing to join their plan,
you are not obligated to accept what they pay.”

Dr. Haeck, the
Seattle plastic surgeon, said he shifted to 90 percent cosmetic surgery
from a practice that was half cosmetic and half reconstructive, after
price-cutting insurers threatened to reduce his income by 30 percent.
For instance, he said, his share of fees for breast reconstruction after
cancer surgery dropped to $1,980 from $3,800.

Dr. Haeck resigned
from eight managed-care networks, freeing more time for
breast-enlargement procedures that he said bring in around $3,800 each.

He
hired a marketing expert to, as he put it, ”ramp up that side of the
business.” Dr. Haeck also began giving seminars at a local athletic
club and appearing on local television, and he changed his
advertisements to feature his cosmetic services.

Dr. Gwendolyn
Maxwell Davis, a cosmetic surgeon in Tucson, Ariz., took one look at the
field of plastic surgery when she finished her training and decided to
devote herself exclusively to cosmetic procedures. She charges $6,000
for a face lift, $4,500 for breast enlargement, and $4,500 for a ”tummy
tuck.” All told, she expects to net $450,000 this year, after only two
years in practice.

Another fast-growing niche is infertility
treatment. The American Society for Reproductive Medicine reported
32,000 cycles of in vitro fertilization were initiated in 1993, the most
recent year for which numbers were available, up 76 percent from 1989.
And physicians say that the number has grown significantly since then.

”From
a purely financial point of view, I’d rather not have managed care
involved,” said Dr. Ira Charlip, a San Francisco urologist who
specializes in infertility. ”I can charge the patient a reasonable
amount and they pay 100 percent of it.”

Advances in laser
technology have opened numerous new medical opportunities as well, many
not covered by insurance. Some are cosmetic, like burning off tattoos
and age spots, zapping wrinkles and removing hair.

Other
procedures, which some insurers cover, include removal of disfiguring
birthmarks. New laser procedures are growing much faster than older
procedures covered by managed care, Irving Arons, managing director of
Spectrum Consulting in Peabody, Mass., said.

”Doctors are
looking for new ways of generating revenue,” said Larry Haimovitch, a
medical technology consultant in San Francisco. ”If they can buy a
laser machine and pay it back quickly, they do it.”

Some of the
newest lasers are used to treat myopia by changing the shape of the
eyeball. Dr. Frank O’Donnell, a St. Louis ophthalmologist, had
encountered big reductions in what insurers allowed for cataract
surgery. ”It’s pretty hard to scramble to replace a 50 percent
reduction in reimbursement,” he said.

Now, Dr. O’Donnell
specializes in laser treatments for myopia at $1,500 to $2,000 an eye.
He is also chairman of Lasersight Inc., a start-up company that he said
was testing a second-generation laser for myopia.

Dr. O’Donnell
laments the changes in the medical business brought on by managed care,
and says he worries about whether the most talented doctors will flee to
other professions.

”Ophthalmology has gone from being an
exciting, very valued specialty to something that is not very desirable
anymore,” he said. ”It’s painful — we used to be able to attract some
of the very best doctors.”

Mr. Arons of Spectrum Consulting
said that there were at least 50 laser vision centers in the country,
each with several physicians. He projects 200 centers by the end of the
year and a million procedures a year by 2000 at $1,000 each as the price
of the equipment comes down — a $1 billion market.

Dr. Roy
Geronemus, director of the Laser and Skin Center of New York, which does
both insured and uninsured procedures, said attendance had increased
sharply for his course in new laser techniques at New York University
Medical Center. Some of his students, he said, are physicians ”who are
looking for ways to circumvent the constraints on medical
practice.”